San Francisco Renters Suffer as Home Sharing Platforms Profit

September 30, 2014

Home sharing businesses, such as AirBNB, Homeaway, Roomorama, and VRBO have created online platforms to facilitate short-term rentals. Earlier this year, Forbes reported that the largest of these companies, AirBNB, Inc., achieved a valuation of $10 billion following a $450 million funding round. However, tenant groups have accused home sharing companies of driving rental costs up at the expense of renters in San Francisco, where AirBNB is based.

Impact on San Francisco Housing Supply

While San Francisco rent prices have soared in recent years, its vacancy rate has hovered at roughly 3 percent, one of the lowest in the nation, according to the Wall Street Journal. But the U.S. Census indicates San Francisco County has a 36.9 home ownership rate, meaning the majority of residents rely on rental properties for their housing. Recently, the San Francisco Chronicle found almost 5,000 San Francisco homes are rented through AirBNB, two-thirds of which are entire homes or apartments, and 160 of which are rented full-time. Critics have argued that some property owners use home sharing businesses to circumvent San Francisco’s rent control and tenant protection laws in order to collect higher, short-term rental prices, causing properties to be removed from the already tight housing market. Others have claimed these business models violate laws against illegal hotels.

According to the SF Chronicle, the impact of home sharing companies has also been said to decrease the welfare of property residents where AirBNB rentals occur. Such tenants experience increased traffic, security risks, and disruptions from having people using units in their apartment buildings as vacation rentals.

Increased Evictions to Establish Short-term Rentals

A rise in suspicious Ellis Act, no-fault evictions, indicates landlords are evicting tenants illegally in order to charge more for short-term rentals, the San Francisco Bay Guardian reported. According to the San Francisco Rent Board, Ellis Act evictions increased 81 percent from 2012 to 2013, and 86 percent from 2013 to 2014.

Individual lawsuits have begun to address this issue. The San Francisco Chronicle reported a case was filed in January by a man evicted for what was deemed an owner move-in. The lawsuit alleged the real reason the tenant was evicted was so the building owners could rent units through AirBNB. In April, San Francisco City Attorney Dennis Herrera filed suit against two building owners who evicted tenants illegally under the Ellis Act, claiming they were removing the properties from the rental market. Two of the evicted tenants were disabled. The Ellis Act restricts re-rental of properties for five years after an Ellis Act eviction. The defendants in these cases defied such restrictions, and admitted to charging high nightly rates for the properties, which they rented through AirBNB, VRBO, and Homeway. Herrera stated: “In the midst of a housing crisis of historic proportions, illegal short-term rental conversions of our scarce residential housing stock risks becoming a major contributing factor. The cases I’ve filed… target two egregious offenders. These defendants didn’t just flout state and local law to conduct their illegal businesses, they evicted disabled tenants in order to do so.”

In August, protests occurred outside a North Beach apartment building where elderly tenants were evicted so that the building could be converted into short-term vacation rentals. Current laws in the San Francisco Planning Code prohibit short-term rentals, but regulatory changes may be underway.

Proposed Changes to San Francisco Housing Regulations

AirBNB recently announced that it will begin collecting San Francisco’s 14% hotel tax as of October 1, which it had previously pledged to begin collecting in July. The San Francisco Tax Collector’s Office originally found AirBNB responsible for the hotel tax in April 2012, and the company has not addressed whether it will pay the estimated $1.8 million back taxes owed. AirBNB-rented properties currently violate San Francisco city code prohibiting rentals of less than 30 days. The San Francisco Board of Supervisors developed proposed changes to housing regulations, which would allow AirBNB to continue to operate legally under certain restrictions. On September 29, 2014, the Land Use and Economic Development Committee voted to send one such proposal to the full Board of Supervisors, to be voted on in early October 2014.

Have you been evicted from your San Francisco rental property, or has your rent increased?

If you live in the City of San Francisco and you’ve had significant increases in rent, been forced move out due to substantial rent increases, or if you were evicted from your rental property so that your apartment could be converted into a vacation rental, please contact one of our consumer attorneys today. Call us toll-free at (866) 981-4800, or fill out the form to the right for a free and confidential attorney consultation.